8 Essential Parts of Real Estate Evaluations

By November 16, 2017 January 21st, 2020 No Comments
real estate evaluations

Real estate evaluations are an integral piece of the appraisals puzzle, but often cause the most confusion for our clients. How does an evaluation differ from an appraisal? What are the major components of an evaluation? The truth is, evaluations are a part of the daily grind in our industry. Now more than ever, we’re dedicated to not only educating our clients about evaluations but offering them as part of our services, too.

When is an evaluation needed instead of an appraisal?

As we’ve discussed before, your internal policies at your bank will determine whether an evaluation or an appraisal is needed. For residential evaluations, we commonly see that evaluations are completed for loans under $250,000. For commercial evaluations, it boils down to your bank’s policies and practices, so be sure to familiarize yourself with your internal structures.

Who can complete real estate evaluations?

At MountainSeed, evaluations are completed by a certified, experienced appraiser. However, that’s not always the case. In fact, many residential real estate evaluations and commercial real estate evaluations are completed by those without appraiser designation. If you do choose to outsource your evaluations, make sure you’re placing your trust in the right (certified) hands.

What are the essential parts of an evaluation?

There are 8 essential, non-negotiable parts of an evaluation. Those are:

  1. Identify the location of the property.
  2. Provide a description of the property and its current and projected use.
  3. Provide an estimate of the property’s market value in its actual physical condition, use, and zoning designation as of the effective date of the evaluation.
  4. Describe the method(s) the institution used to confirm the property’s actual physical condition and the extent to which an inspection was performed.
  5. Describe the analysis that was performed and the supporting information that was used in valuing the property.
  6. Describe the supplemental information that was considered when using an analytical method or technological tool.
  7. Indicate all sources of information used in the analysis, as applicable to the valuation including external data sources, property-specific data, inspection evidence, photos, neighborhood description, and local market conditions.
  8. Include information on the preparer when an evaluation is performed by a person.

Still unsure about residential and commercial evaluations? Let’s schedule a time to chat.